My wife and I will be completing a sale on our new bug-out property in a couple of weeks. We are getting a smoking deal. I know that many of you are interested in a similar deal, but perhaps do not know all the tricks of the trade to get the kind of deal you deserve. Not that I know them all either, but we have had some experience buying properties on the cheap and I simply wanted to share what we have learned and open a conversation that invites the expertise of several real estate pros that I know haunt these forums.
In a nutshell, since 2006 we have purchased ten foreclosed properties. Some have needed extensive renovations, others just minor repairs, flooring and painting. Of these homes, we have sold four, making a profit on each. We still own four as rentals (underwater now). We live in one, and have recently acquired the bug-out property. We purchased each home at the low end of market value, or far below it.
What I presume many of you may be seeking is a home where you could live off the land, if you had to. We all seek varying degrees of security, as well as the “remoteness” factor that may provide safety from rioters and help one keep out of fascist crosshairs. We all have other constraints of family, feeling at home, nearby nuclear missile sites* that motivate us.
So here is our method:
- Have a well-connected, aggressive realtor
- Line up your money
- Know what you want.
- Be patient and watch
- Act fast
- Make a cash offer
- Do not fear
We have had discussions here about locations. That is your first decision. Are you going to stay close to where you currently live, or move to a familiar location, or really get out. It is easier to buy close to home because you know the area and already have some ideal of real estate valuations.
We have had our best results buying from banks. They have no sentimental attachments and are often willing to let go of a home for much less than it is worth. Usually, they just want their money back out.
Have a well-connected, aggressive realtor
There is often a realtor in each market who has more or less locked up all the foreclosure business. Learn who that realtor is and watch her/his website, or subscribe to that persons email notices of new listings. You probably do not want to deal with that person directly, because they are very busy. But you want a realtor who is on a first-name basis with that person. Our most recent offer was accepted because our realtor has worked with this “guy” often. He knew that she always brings a serious buyer. We don’t bother our realtor with a the search process—just the offers, because she does not make as much money on low offers and we don’t want to lose her good-will. We don’t ask her to show us a house unless we really like it. Then she acts fast on our behalf.
By the way, the commission comes out of the seller’s pocket, so using a realtor to buy costs nothing extra. Homes that are offered by owners are usually priced much higher. I could consider that route if the owner would carry the note.
Line up your money.
Well, this is the tricky part. I have a credit card with a 50K limit that we have used to buy several properties. Then we refinance ASAP to get out of the high interest. It is expensive to use with a 4% cash advance fee, then hefty payments until we pay it off after refinancing. But it is much cheaper than paying loan origination fees, required inspection fees, and a dozen other fees that the bankers and real-estate industry manage to stack into a normal deal. After acquiring the property, we “refinance” or get a “Home equity” loan. There are far fewer fees for these kinds of loans. In this case, we had enough metal to sell that would pay for the home. Fortunately, my wife’s brother encouraged us not to sell our metal to a stranger—he offered to buy it at spot. We also want this home to be lein free. We could pay for the house with a home equity loan on our current residence in the city, mortgaging it to the max, but making the bug out property free and clear.
Know what you want!
Make a list. But be flexible within an acceptable range. You probably will not find your dream home this way—you have to build that one from scratch—and that is expensive if you are not a builder. So consider each property that interests you on its own terms. We find that we often like a home better after we buy than before. We recognize benefits we did not notice before (could be cognitive dissonance). But the old adage is true—location, location, location. That is the one thing you cannot change or repair.
Our list looked like this:
- Sufficient interior space
- Sufficient land—2 acres
- Good water
- Zoned for Farm animals
- Sufficiently remote (edge of small agricultural-retirement town)
We got four of five. AFter we install a well,, it will be fine. the electric to run a well pump is much cheaper than a water bill. We always look for a “twist”—a garage that can be built into a room, zoning for a 2nd home on the property, an existing 2nd residence, room for RVs… Once you see a home that roughly fits your list, check the county website for tax rates, drive by the home—walk around it, look in the windows to see if it has damage and trash. Our property came with a few extras that we like.
- Animal pens
- An 800 square foot building.
- An old "cottage"
- Two out buildings
Be patient and watch
Start watching closely now, even if you are not ready yet. Get familiar with pricing in your market. Your realtor can send you every new listing as it comes out. Now, your realtor probably will not find this home for you. You’ll have to diligently search for it. We have realtor.com set up to email us new listings. New listings also appear on zillow.com. Fannie Mae and Freddie Mac also have websites that will send you email alerts. You can also have it sort out the ones you are not interested in by price, by lot size, etc. Be ready to wait a while. Currently, in our market, we see about one home every six months that is severely under priced. Several years ago, there were always two or three on the market.
- Zillow.com—this incredible site tells you what all homes are worth—just click on the ones around the area. Bankers are now using it to do rough estimates for loans to see if a deal can work. IN our experience, the site seems to be 10% above an actual sale value.
Make an offer in the first 24 hours if possible. Every hour counts. You don’t have time to ponder unless the home is listed on a Friday and they will not accept offers until Monday morning. This is where your realtor’s connections will show their value. Often, a listing realtor will call an investor friend the day before it is listed and give them a sneak peek. There is not much you can do if this happens. But the “foreclosure realtor” in an area has too many homes moving through their office to do favors like that for friends, so you have a fair chance.
Make a cash offer
We found that in our market, you have to offer over full price to have a chance. Your realtor can advise you in this. In this recent deal, we offered about 1% more than they were asking. Our contract offer was set to close quickly (7 days). Let the buyer tell you more time is needed—and they probably will. The seller (Fannie Mae) required a 10% earnest money payment with the offer. That surprised us, because usually $1000 is enough.We also had to provide a bank statement showing the cash. We provided our credit card statement showing the available balance. They accepted that. Just yesterday, I sent over our bank statement showing the funds from our metal sale in the account. A photo of you fondling a stack of metal will probably not suffice. Our realtor told us that the seller on the recent offer took ours because it was over full price, was fast, and it gets the property off his desk and he can tell the next 50 people interested that “ it is already sold—go away!”
Do not Fear
Real estate tends to be forgiving--unlike AGQ options. These foreclosed homes always have issues. Some are in horrible shape. Now and then, the seller will pay to have it repaired and still not ask top dollar. Usually, you can expect some clean-up and superficial work. But if you can paint, repair stuff, and do cleaning, then don’t hesitate to take on a project. If it needs more extensive work, you will not have time to get a contractor to bid it. But if your price is low enough, the deal will work for you. Our current purchase needs a well.
Until we need to live on that property, we will rent it out at a nice profit, using the income to make improvements. We will be planting nut and fruit trees this Spring, renovating a small old cabin into a “tiny house” and setting up several RV pads—just in case the in-laws need a place (temporarily). We are already getting to know our neighbors—the guy next door is a vet and I don’t mind a friend like that. The property came without a well—tied onto a neighbor for water. I suspect that “flaw” is why we got the first bid accepted. We were not afraid of hiring a well driller at whatever the cost (5-10K) and knew this flaw could be corrected.
We were blessed with this one. We are paying about 48K plus the cost of a well. I believe this would sell immediately for close to 150K if we flipped it. THAT's the kind of deal you can find if you are patient and act fast.
I know that several of you are builders and in real estate. I am closer to being an amateur than a pro and I think we would all appreciate your corrections and additions to this article.
* Yes, there are cleverly disguised missile silos about 18 miles from my current home. I don’t feel good about that.
Rhabdomancy... or Dowsing for Water? I doubt it!
Well, I got me a edjumacashun this morning. This new prepper property we bought is just beyond the extent of the city water lines. It has no well. The prior owner, who is now deceased, was supplied with water by her sister, who lives a quarter of a mile away, through a thin plastic agricultural waterline that was only buried six inches deep in some places along its route over hill and dale. They have dug it up and repaired it often over the years. While the sister is likely willing to provide us water as well, with a shared well contract, we decided that we are better off being self-sufficient. Hmmm... what are my options?
I calculated that rainwater harvesting in this region would provide about 1500 gallons per month (14 inches of rain per year). While that may supply a water-frugal family, it isn’t enough for gardening, orchards and livestock. Besides, the rains are not even y spread throughout the year and it wouldn’t be safe to drink without serious treatment (birds shitting on the roof). Hmmm… need more and better water. I began researching other options.
I have an old friend who is a geologist with the State. He is checking the maps for me and will suggest a good location for my well. I told him about a water finding service that uses underground sonar to measure the density of rock and water content underground. For a mere $2000, they will come out and find water. My friend said I didn’t need to hire them, he doesn’t trust their technology, and whatever I do, stay away from those water-witches. They are nothing but charlatans!
I called several well drillers and asked for bids. The first one bid $9000 (cough, gag, choke, cough) He did not guarantee finding good water. The next gave me a quote of $5500 to drill (gag, cough) and I would install of all the pump equipment. The third guy, Bill, came out today. His grey hair and beard, bronze skin, and bone-crushing handshake made me like him instantly—and that is when my learning began. A little later he quoted me a price of $2700 to drill the well. I’ll cover the costs of running electricity, the water line, and the other plumbing myself.
I showed Bill where the septic system leach-field was, cause it is not a good idea to drill there (water tastes icky) and we walked to the opposite corner of the two acre parcel. Along the way, we stopped at a mesquite tree where Bill cut off a small branch with some handy pruning shears he had in his back pocket. He trimmed it down into a pretty little Y shape. (Yes, you know where this is headed…)
He then held the stick by the branches of the Y pinched between his thumbs and palms (at the end of his lifelines), palms up, wrapped his fingers around next, and then curled his wrists upwards causing the stem of the Y to point upwards, and started walking slowly across the sandy field, chanting an ancient rhyme with his eyes closed. (Actually, I am kidding about the chant and closed eyes)
Then it happened!
the stick went “zoink,” twisting downward in his hands with the stem pointed at the water underground.
“I didn’t do that.” Bill said. He walked over the same spot from the other direction and it went “zoink” again. We walked around a bit more, finding a couple more “hits,” which my wife and I promptly marked with piles of stones. As we walked around, he told me that an old woman taught him this method. He had drilled 4 holes on one property—all dry. The woman came over from next door, did her magic, and said” Drill here” The spot was a mere 18 feet from his last hole. They drilled. Sixty feet down they hit good water. He put a high powered pump on it to clean it out and 100 gallons per minute flowed out consistently. He concluded (from his drill material) that she had found an underground depression in a layer of clay that collected underground water in that area.
Then I asked if I could try it. Bill showed me how to hold the stick. He explained the need to walk north and south in this area to cut across the direction of the underground flows. I started walking and sure enough the stick went “zoink.” I started chuckling. That was just weird. I tried it again, being oh so very careful not to inadvertently move the stick on my own. “Zoink!” I laughed again. That is really, really weird. My wife tried it next, but it wouldn’t do it for her. She thinks she held the stick wrong. I think she is not a witch.
I am very curious now to know what kind of water, if any, we find down there. Does the stick make a difference? The direction you walk? Prayer? Bill didn’t seem too particular. In short, I’ll do some empirical testing. Is this witching method actually scientific? Is it spiritual? Is it evil—even without incantations and animal sacrifices? Does a mysterious ability to find life-giving water come from the God or the devil? Logic would suggest that a good thing comes from a good spiritual place. Science does not know everything—a fact which scientists too often are loathe to admit. Whatever it is, it sure was weird. Science has not been able to verify any greater success rate than statistical chance would indicate. But scientists can sure be irritating when instead of simply stating their statistical results, they ridicule and cast aspersions upon the “believers.”
Did I mention that it was really weird when that stick moved on its own?
But seriously, I thought my practical research into securing a good supply of water might be handy for others. No matter what we do, it is going to cost something--hopefully, not my soul.
A pump, pressure tank and all associated parts currently cost about $500-600, new.
Professional Well System: Total set up cost: $5-9000.
I was surprised at the bids I received (except Bill’s). Expensive, hit or miss success in the western US. You have to pay the driller whether you find good water or not. State permits required to drill. Only licensed drillers can get a permit. Electricity required. I am sure Bill will find some water, but it may be so mineralized that it is not fit for drinking or running through plumbing fixtures in the home—just gardens and livestock.
Self drilling: Total set up cost: $1000.
In this state, you better be somewhat sneaky about it. We found a used “mud pump” for sale for $500 that would supply wonderful water pressure and drill multiple wells. You can also rent these by the day—figure all day or two to drill down 30-60 feet. The rest of the casing materials needed would run a couple of hundred. Electricity optional—a hand pump or windmill would work to get the water into storage—just like grandma and grandpa used to do!
A mud pump will provide good pressure through a 1.5 inch line and can handle sand & debris that would damage a regular pump. You have seen these at construction sites where they are pumping rainwater out of a hole or trench to continue underground work. The rest of the materials needed would run a couple of hundred. Total set up cost: $3000.
Hauling water: Total set up cost: $3000.
Many people here in the desert buy their water and haul it in a trailer and pump it into a tank at their home. It’s very cheap, but then you have to do the hauling every 2-3 weeks, or hire someone deliver water in a big tanker truck (haulers charge more than a water bill from the local water company.). I like that plan due to the low expense of buying a tank and pump-pressure equipment. I’ll have it all set up in a day. And we’ll still harvest the rain for gardens and animals. The problem is that the water supplier could shut me off in a disaster—not self-sufficient. But I need the storage and pump equipment no matter what route I take.
Trailers can be bought in these parts for as little as $1000. Our water company charges $3.50 per thousand gallons. The water is good for drinking. A family of four with lavish American water use will consume at least 4000 gallons. Conservation helps greatly. Storage tanks cost about a dollar per gallon. They can be above or below ground.
Rain harvesting: Total set up cost: $2000.
You need a storage tank, pump and all other water equipment. For gardening or live stock, no filter needed. But if you want to drink rainwater, you better pay for a good filter and use a chlorination system.
City Water: We all know how this works. You get a bill each month.
The bottom line for me is self-sufficiency. I plan to harvest the rainwater, and drill the well using the licensed driller. I will install a solar electric system to run the pump. I may self-drill an un-permitted second well just for fun. The rainwater will go for the garden, chickens, & perhaps livestock. I’ll filter what comes out of the well and we’ll use a Berkey system in the house for drinking water.
I am not a wealthy man. Whether or not this economy totally collapses and I need to be self-sufficient for survival is to be seen. But either way, I do not expect social security to provide my retirement. My employer retirement account will probably get MYRA’d into T-bills, providing just a trickle of income—or nothing. So my PMs will pay for my home, my water, my solar electric system and I’ll do my best to survive after I can no longer work in my industry. This planned system will eliminate my utility bills. Currently, those run about $200 per month--$2400 per year. The system will pay for itself in four years, and right now, I can afford to install everything. After that, I have free water and electricity for life, with some maintenance costs along the way. I’ll have a paid off home. Taxes will have to be paid, but I think I can set aside enough gold to cover property taxes for life. Right now, it is an ounce per year, but hopefully that will change soon.
I liquidated a chunk of my stack and bought this particular property because it cost only 30% of its current realistic market value. I have not ruled out reselling or renting it after the renovation and improvements are complete, then purchasing a better property with profits (or rental income).
My advice? Choose your land and long-term property carefully. Consider all costs. If there is already a good septic system and productive well in place, with good water available, that is a huge advantage. And if you don’t have a well on the property yet, find a good Y shaped stick from the tree, use the method above, and start witching!
But I don’t know everything, and much of what I think I know is flawed. So flame away, straighten me out, augment, or refute. I hope all can take away something useful from this discussion. And how in tarnation does rhabdomancy relate to precious metals? Well (pun intended), they say you can find gold using this method also.
Some Sorcerers do boast they have a Rod,
Gather'd with Vowes and Sacrifice,
And (borne about) will strangely nod
To hidden Treasure where it lies;
Mankind is (sure) that Rod divine,
For to the Wealthiest (ever) they incline.
Samuel Sheppard, 1651